Cheat Sheet

Bookkeeping Workbook For Dummies Cheat Sheet (UK Edition)

Bookkeepers are the keepers of the cash and the crucial caretakers of all information about a company’s transactions. Whether you’re an owner keeping the books yourself or you’re an employee keeping the books for a small business owner, your job is critical for the smooth financial operation of the company. This Cheat Sheet gives you the essential, need-to-know information to keep handy as you perform this essential role.

Building Blocks of a Bookkeeping System

At the root of any system you’ll find the essential elements that form the basis of that system. In the world of bookkeeping, the three most fundamental building blocks to any bookkeeping system are:

Chart of Accounts: Lists all accounts in the books and is the road map of a business’s financial transactions

Journals: Place in the books where transactions are first entered

Nominal Ledger: The book that summarises all a business’s account transactions

Flow of Credits and Debits in Double-Entry Bookkeeping

In double-entry bookkeeping, you enter all transactions in the books twice: once as a debit and once as a credit. This chart shows you how debits and credits affect your various business accounts:

Account Type

Debits

Credits

Assets

Increase

Decrease

Liabilities

Decrease

Increase

Income

Decrease

Increase

Expenses

Increase

Decrease

Tracking Cash: Bookkeeping Musts after You Get the Money

Receiving incoming money is all well and good, but as a bookkeeper you need to remember to take certain steps after it arrives. You need to:

Record transactions in your books.

Track individual customer accounts.

Record any discounts that were offered.

Track any returns or allowances.

Collect from customers to whom you sell on credit.

Monitor customer accounts to be sure they pay on time.

Write off accounts from customers who just won’t pay.

Tips for Controlling Your Business Cash

If keeping the books is your responsibility, the good news is that you can implement the following function separations to control your business cash much more easily:

Separate cash handlers. Be sure that the person who accepts cash isn’t also recording the transaction.

Separate authorization responsibilities. Be sure that the person who authorizes a payment isn’t also signing the cheque or dispersing the cash.

Separate the duties of your bookkeeping function to ensure a good system of checks and balances. Don’t put too much trust in one person — unless it’s yourself.